MomentumOptions.com Pre-Market Update for 1/8/2020
Tech Shows Strength Before Fizzling
The market showed some strength on Tuesday following better-than-expected economic news but floundered throughout the session to settle lower. The start of the CES 2020 event gave Tech stocks a boost as the latest and greatest gadgets made their debut but it wasn’t enough to offset the overall weakness in the major indexes.
The Dow declined 0.4% after testing an intraday low of 28,565. Current and upper support at 28,600-28,400 was breached but held with a close below the latter signaling additional weakness towards 28,200-28,000.
The Russell 2000 slipped 0.3% following the opening backtest to 1,653. Near-term and upper support at 1,650-1,635 was challenged and held with a close below the latter signaling further weakness towards 1,620-1,605.
The S&P 500 was also lower by 0.3% after trading to a low of 3,232 shortly after the open. Near-term and upper support at 3,225-3,200 was challenged but held with a move below the latter getting 3,175-3,150 back in play.
The Nasdaq dipped 3 points, or 0.03%, despite testing an intraday high of 9,091. Lower resistance at 9,100-9,150 was challenged but held with a move above the latter and the all-time high of 9,093 signaling additional upside towards 9,200-9,250.
Communication Services nudged up 0.1% and was the only sector that closed in positive territory. Real Estate sank 1.1% and was the leading sector laggard while Consume Staples and Financials fell 0.8% and 0.7%, respectively.
In economic news, ISM Non-Manufacturing Index rose 1.1 points to 55 in December, up from 53.9 in November, while topping estimates of 54.5. The 2019 low was 52.6 from September, and the high was 59.7 from February. The employment component dipped to 55.2 versus 55.5. The new orders index declined to 54.9 versus 57.1 previously. New export orders fell to 51 from 52. Imports improved to 48 from 45. Prices paid were 58.5, matching the 58.5 seen in November.
International Trade Balance Level came in -$43.1 billion, versus October’s -$46.9 billion tally, and forecasts for a print of -$43.9 billion. Exports rose 0.7% to $208.6 billion versus $207.3 billion in October. Imports fell -1% to $251.7 billion versus $254.2 billion. Excluding petroleum, the shortfall was -$43.9 billion compared to the -$47.7 billion previously. The “real” deficit was -$75.3 billion from -$79 billion.
Factory Orders dropped -0.7% in November versus a revised 0.2% gain in October. The -2% drop in durable goods orders was revised to -2.1%. Excluding transportation, orders edged down -0.1%. Nondefense capital goods orders excluding aircraft were up 0.2% after rebounding 1.1% previously. Factory shipments were up 0.3% versus the prior 0.1% reading. Nondefense capital goods shipments excluding aircraft were off -0.7% following the 0.7% rise previously. Inventories were 0.3% from October’s 0.2% gain while the inventory-shipment ratio was unchanged at 1.40.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session after closing a penny off the session low of $137.64. Near-term and upper support at $138-$137.50 and the 50-day moving average were tripped and failed to hold. A close below the latter would signal a further backtest towards $137-$136.50.
Lowered resistance is at $138.50-$139.
The S&P 500 Volatility Index ($VIX) continued its whipsaw action with the first half peak reaching 14.46. Current and lower resistance at 14.50-15 was challenged but held. A close above the latter and the 200-day moving average would signal a retest towards the 15.75-16.25 area.
Upper support at 13.75-13.25 held on the afternoon fade to 13.39. A close below 13 and the 50-day moving average would be a more bullish signal for the market.
The S&P 400 Mid Cap Index ($MID) was down for the 3rd-straight session following the morning pullback to 2,043. Current and upper support at 2,040-2,020 was challenged but held. A close below the latter would signal a near-term peak with further backtest potential towards 2,020-2,000 and the 50-day moving average.
Near-term resistance is at 2,060-2,080 with the current all-time high at 2,073. Continued closes above the 2,075 level would be a renewed bullish signal for a possible jailbreak towards 2,100-2,120.
RSI is trying to level out with support at 55-50. A close below the latter and the early December low would be a bearish signal for additional weakness towards 45-40. Resistance is at 60.
I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 0-0 (0%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records. Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades.
Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Stops” entered to close any trades or “Limit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the Daily updates.
Spider Gold Shares (GLD, $147.97, up $0.58)
GLD February 145 puts (GLD0221P00145000, $1.05, down $0.30)
Entry Price: $1.00 (1/7/2020)
Exit Target: $2.00
Stop Target: None
Action: The Spider Gold Shares (GLD) was up for the 6th-straight session and for the 12th time in 13 with the intraday 7-year high reaching $148.14. Multi-year and lower resistance at $148-$148.50 was cleared and held. A close above the latter would be an ongoing bullish signal with upside potential towards $150.50-$151 over the near-term.
Current support is at $147.50-$147. A close below the latter would signal a near-term top with backtest potential towards $146-$145.50.
RSI remains in an uptrend with major resistance just north of the 85 area. This area has been the peak over the past 7 years, and as recently as last June and represents extremely overbought conditions. Current support is at 80 with a move below this level signaling additional weakness towards 75-70.
The overbought conditions were the main reason we got into this trade. However, a pop towards $150 could come on heightened geopolitical tensions. I would like to see a close below $147 this week to get this trade going.
Dropbox (DBX, $18.53, flat)
DBX April 20 calls (DBX200417C00020000, $1.00, flat)
Entry Price: $0.90 (1/6/2020)
Exit Target: $1.80
Stop Target: None
Action: Shares traded to a high of $18.77 with current and lower resistance at $18.75-$19 getting cleared but holding. Current support remains at $18.25-$18.
Pfizer (PFE, $38.75, down $0.13)
PFE March 40 calls (PFE200320C00040000, $0.70, down $0.05)
Entry Price: $0.75 (1/2/2020)
Exit Target: $1.50
Stop Target: None
Action: Tuesday’s low tapped $38.68 with upper support at $38.75-$38.50 getting breached but holding for the 5th-straight session. Resistance is at $39-$39.25.
The penny close below the 200-day moving average was a slight concern but the 50-day moving average remains on track to form a golden cross. If completed, this is typically a bullish signal for higher highs.
AT&T (T, $39.25, up $0.15)
T March 40 calls (T200320C00040000, $0.80, up $0.05)
Entry Price: $0.70 (1/2/2020)
Exit Target: $1.40
Stop Target: 72 cents (Stop Limit)
Action: Set an initial Stop Limit at 72 cents to start protecting profits.
Shares tagged a high of $39.30 with lower resistance at $39.25-$39.50 getting cleared and holding. Support is at $39-$38.75.
Limelight Networks (LLNW, $4.39, up $0.08)
LLNW January 3 calls (LLNW200117C00003000, $1.40, up $0.05)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2 (closed 1/3 @ $1.40 on 10/22)
Stop Target: 75 cents, raise to $1.15 (Stop Limit)
Action: Raise the Stop Limit from 75 cents to $1.15 on the remaining 2/3rd’s of the trade.
Shares traded up to $4.40 with prior and lower resistance from mid-October at $4.40-$4.50 getting kissed but holding. New support is at $4.30-$4.20 and the 50-day moving average.